Long term capital gains tax on equity: Are you worse off than other countries?

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After the introduction of Long Term Capital Gains Tax or LTCG on equity markets for holdings over one year in the just-concluded Union Budget 2018, we took a look at capital gains taxes on stocks in different countries. Here is what we found:

Some countries have different tax rates at different levels of overall income. The USA imposes a tax rate of 0% for income up to $37,950. Its highest rate of 20% only kicks in for incomes of $418,401 and above (equal to about Rs 2.66 crore).

The UK imposes an 18% capital gains tax on incomes below GBP 43,000 and 28% for higher income. However it also separately provides a tax-free capital gains allowance of GBP 11,300. Canada exempts 50% of the gain from tax but taxes capital gains as per the applicable slab.

Different countries approach capital gains differently. Many impose higher rates on higher slabs than India’s highest slab, but lower rates on lower slabs than India’s. Others offer a tax-free allowance. Thus, relying on a headline rate comparison may not give you an accurate picture.

Capital Gains Tax on Equities across major countries

Country

STCG

LTCG

Holding period for LTCG

USA

As per slab

20%*

1 year

India

15%

10%**

1 year

UK

N/A

28%***

No distinction with LTCG

Australia

As per slab

As per slab

Same as income tax

Canada

As per slab

As per slab****

N/A

*For the highest tax slab. Taxes go from 0% to 20% depending on the tax slab.

**With gains up to 31st January 2018, grandfathered

***For highest slab. Capital gains allowance of GBP 11,300 given.

****50% of gain exempted.

Disclaimer: Rupeeiq is not a qualified tax advisor in any jurisdiction and there may be several complex provisions that alter the overall tax effect in different countries. We have considered only headline rates.